Revamped military plant ready for bright future

TALLINN - When the Soviet Union collapsed, it looked as if Dvigatel, a former military machinery plant, would go down with it.

But once it changed its production target, the company started seeing brighter days.

The 100-year-old plant, which specializes in the manufacture of large metal structures, is now exporting 80 percent of its production to Scandinavia. Five years ago, 100 percent of the production went to Russia.

"The transition was difficult. We were new on the market. But this year, we have managed to communicate directly with the companies without the need for negotiators," said Koit Kaaristu, development director at Dvigatel.

The plant started business with the production of railway carriages in 1899. It also produced nuclear reactors and ship engines during the Soviet period. Today ship devices, ventilation, strainer systems and all kinds of metal structures are produced on the plant's 50 hectare territory in Tallinn. Part of the territory has been rented out due to its favorable location.

"The products of Dvigatel meet international requirements. We have been inspected, and we are producing very trustworthy machinery parts," said Kaaristu.

But in order to be more successful, Dvigatel has set its sights on finding a foreign investor.

"We are planning to widen the range of production and include foreign investors. Our machinery needs investments," said Kaaristu.

Although the management of the plant has held negotiations with several potential partners, Kaaristu does not want to make them public as it is against good business ethics. One third of Dvigatel's share capital belongs to a consulting company Mainor and the rest to the plant's employees.

A Norwegian shipbuilder Ulstein is interested in acquiring a large stake in Dvigatel's subsidiary Teno. Ulstein's investment into Dvigatel could be about 60 million kroons ($ 4.5 million), as BNS reported.

The two parties updated their cooperation plan for the coming year Dec. 4, under which Dvigatel will supply Ulstein with products worth 50 million kroons a year. As the plant predicted a 100 million kroon turnover and a 20 million kroon profit for 1998, Ulstein's share in the plant's turnover is comparatively big.

Dvigatel was also put on the list of the official suppliers for the engineering concern ABB Dec. 2, after ABB's representatives investigated the plant's technical capacity and current products. Dvigatel has so far done a few test jobs for ABB, such as electrical filters.

The customers of the plant also include Norway's metal processor Flebu - Ticon, Finland's producer of metal structures Kvaerner, Norway's producer of hydraulic knots Gynde Doff, and several Estonian companies.

Besides Polish and Romanian companies, Dvigatel does not have many competitors.

"We are quite competitive. Most of it depends on the ability to keep the costs in balance. If the price of electricity increases, we are losing our position," Kaaristu said. "We do not have subsidies on exports like Romania does. The quality is almost the same, as we are all certified by the same German company. As the competitors are closer to customers, we have to cut costs in order to keep the same price level."

BNS quoted Ulo Parnits, council chairman at Dvigatel, saying shortage of working assets continues to be a problem for the company. The company employees 650 people, 400 of which are directly involved in production.

During the Soviet period there were four times more employees. Kaaristu believes that the economic figures from the Soviet period have never been correct and so he cannot compare the plant's present production capacity with these times. Compared to the beginning of the 1990s Dvigatel's capacity has increased by 40 percent.